focus from his legislative agenda. amazon joins the credit binge, adding to the $1 trillion of u.s. high grade bonds already issued so far in 2017. and investors lock to the federal reserve minutes for clues on how inflation figures might shape the central bank's next move. from new york city, good morning, good morning. this is bloomberg "daybreak." i'm jonathan farrow alongside david westin. alix steele is on assignment. yesterday, a pretty black session for the s&p 500. this morning, stocks firmer in europe and firmer, if you look at futures, up about .2%. euro-dollar softer by about .3%. reuters out with a report saying that perhaps president draghi's speech at jackson hole won't be much of a news-making one. the euro falls back to 1.17. treasury through yesterday after the strong retail sales, stable today at 2.28. david: now it's time for the morning brief.

at 8:30, we'll get u.s. housing starts and building permits for the month of july. then talks begin between the united states, canada and mexico, get underway in washington with the first round of negotiations beginning at 9:30 this morning. and later in the day, the fomc will release minutes from its july 20 to 26 policy meeting at 2:00 eastern time this afternoon. but in the meantime, the fallout continues from the remarkable news conference president trump had here in new york yesterday, where he once again appeared to change his view on who was really to blame for the riots in charlottesville. and this as part of an attempt to refocus on infrastructure. joining us from washington, bloomberg's senior executive editor for international economics and government. so marty, welcome back. i think it's fair to say this was an extraordinary news conference. i really want to focus on the fact that this was all to really focus on infrastructure. that was why he was there, we thought why he came to new york, and he seemed to get off on a tangent again with his staff surrounding him. marty: yeah, i mean, i don't know whose idea it was to hold

a press conference yesterday, but i think the aides thought he was going stay on message. he had his saturday dialogue before him, and everybody thought he was going to read it. and instead, he went to the place he's most comfortable, and that's what he really believes. and that's what you heard yesterday, what he really thinks. david: what is the aftermath at this point? in the real world, what are the tangible conspiracies, both particularly with respect to the republicans? what is the republicans' reaction to this, the people he needs to get legislation through, and also the c.e.o.'s? marty: certainly for the g.o.p., they have distanced themselves already from donald trump to a considerable extent. there was no groundswell of named condemnation. i mean, paul ryan put out a tweet very soon after donald trump's press conference condemning white supremacists, but it didn't mention donald trump by name. they will have to distance themselves from this president,

but they have done that in the past. it's like hard to measure how much further they can possibly go. besides totally abandoning him by name, which they are not likely to do. david: in the meantime, we seem to have a continuation of this story that this c.e.o. president, who's going to be a friend to business, is taking on c.e.o.'s again and again. we have the various defections from his council, but even this morning, he's out with a new presidential tweet saying amazon is doing great damage to tax-paying retailers, towns, cities, and states throughout united states are being hurt. many jobs being lost. so he certainly is not hesitant to take on the business leadership in this country. marty: no, he's not. and don't forget, amazon is the owner of "the washington post," which has been severely critical of this president, and amazon has an acquisition of whole foods before its own justice department. i'm not sure donald trump truly realizes that, but he's gone

after amazon before. he has really no power to do anything about it. it's just lashing out to change the dialogue again by this president. david: ok, pretty extraordinary. thank you very much, marty schenker, coming to us from washington. jonathan: let's bring in the head of public policy research from barclays. he joins us here. it came out yesterday, the chief of staff for the white house, it was john kelly looking very thoughtful, and what i thought when i looked at that picture of him, just the number of weeks ago, many a story was written about this guy bringing order, restoring order to the white house. it doesn't look like there's much order in the white house right now. what do you make of it, and ultimately, what does it mean for the effort to get tax reform through? >> i think the various c.e.o.'s leaving this council is their own personal decision. i don't think it has a dramatic impact on the policy agenda on this. keep in mind, the president can say and tweet lots of different things. but at the end of the day, we need congress to actually pass

tax reform. on the first issue on the chief of staff, my take on him, he has brought a lot of order to how folks report in to him. you're seeing various folks leave. you're seeing more prepared being prepared. but it's very difficult to do this, because how do you control the president, or are you going to spend your time managing the staff around? david: help us sort out. if newer congress, if you're a representative, a senator, how much are you affected by things like this? i mean, you don't vote for legislation because you like the president or dislike the president. you vote for him because you think it's in your best interest and your constituents' best interests. will this really make a difference in tax reform? shawn: you spend a lot of time fielding phone calls. so you may go on an interview or talk about something on trade, with the nafta renotions starting today, and all the constituents, all the people in the audience might ask you about, how do you feel about the president's comments on x or y or this tweet, so you can't get to the things you want to spend your time talking about. jonathan: the difference

between the news cycle and the significance, and maybe to what is actually napping d.c. today, those same congressmen are still going to go to work and i assume they're going to focus on what they were focusing on the day before. so that extent, are those reforms going to get through? shawn: congress is there to govern, and they're trying to put all these things together, as we still think by the end of q 1, you can expect to see tax reform on the table. i'm optimistic they can get a deal done, more likely tax cuts, not a broad-based tax reform. but this process shows me he's trying to win the news cycle by putting out these kind of comments by dominating the news. jonathan: i want to bring in a chief market strategist, joining from us london. for a market participant, it's difficult to divorce the emotion from the events of the last several days and really focus on the fundamentals, if there are any, in d.c. at the moment, and what we may or may not get from washington. give me your thoughts, chris. chris: well, i mean, i think the market remains in this bull

market, and it's largely uninterested in what's going on in washington except to the extent that north korean geo politics keeps coming up and could become a serious issue. but absent putting that to one side, i think washington is not much more than an irritant to the market. i think we've all come to the view that clearly trump's legislative agenda is going to be pretty small compared to what was expected at the end of last year, the beginning of this year, and markets have just got on with it. earnings growth is good. the economy is robust. and the trend is up. now, you know, that's not to say we're not having a bit of a break in that trend short term now, but really, i think the market is largely indifferent to what trump is up to. shawn: one of the things to keep in mind, if he hits problems getting legislation done, and we've seen this on healthcare, but it's going to happen on tax reform, he can be more aggressive on trade. as we begin nafta renegotiations today, there's loft people watching to see

what's he going to be tweeting. will he take a more aggressive tone when it comes to china? he's got the executive order out. or on steel imports, or any other issue going forward. david: i wonder how important it is the president have the support from the business community. larry summers wrote, i fear a massive backlash against businesses is all but inethable. such a backlash would you highly unfortunate, but not difficult to understand. every member of trump's advisory council should wrestle with his or her conscience and ponder edmund burke's famous warning that all that is necessary for the triumph of evil is for good men to do nothing. i like quote edmund burke on tv. how important, we thought this president was going to be largely aligned with the business community. that doesn't seem to be in the cards. does it matter? chris: the one thing for business, the fed remains on the side, which they do, and monetary policy remains super loose. banks continue to lend. and confidence is actually

high, despite all these concerns about what trump is doing. i think the world is collectively coming to the conclusion that trump tweets and storms and rages, and in reality, not that much changes. and, you know, i think weave come to understand that, and markets and business have come to understand that. so unless he actually really does do something quite dramatic with an executive order, i'm not sure what he could or do not do, i think the impact is pretty limited, to be honest. jonathan: does that work both ways? amazon down about .7%. merck actually traded higher, despite the criticism. what i mean is, six months ago, if the president of the united states made a comment, a statement about the potential for tax reform, markets also rallied t. worked both ways. so people are no longer to the damage on the down side, does it work the other way as well? shawn: i think a little bit. i think investors are beginning to realize what's actually possible. the president may say these

great things, but i think some investors are assuming, oh, republicans control congress, they'll easily get this done. but now they're coming to the realization that this is a lot harder than it looks. and if we don't get a tax deal done, i think it's going to be a rude wake-up call. david: shawn and chris, both of them will be staying with us. coming up, antonio garza, former u.s. ambassador to mexico, he'll be joining us, as those nafta negotiations begin in washington. later, the former c.b.o. director joins us with the latest on healthcare. live from new york, and from london, this is bloomberg. ♪

david: this is bloomberg. i'm david westin. this afternoon, we get to see

the minutes from the fomc meetings last month. we'll see what we can learn about the fed's attitude toward inflation numbers and, for that matter, reducing its balance sheet. shawn and chris, and chris, we start with you, you've already said essentially that the fed trumps the white house at this moment. that's more important to the markets and investors. do you expect to learn anything that would be really informative in these minutes? chris: yeah, i mean, we're going to start to see how they're a bit more color on reducing the balance sheet, which i think is key, and i think investors need to remember, of course, that balance sheet reduction is effectively monetary tightening. the pace at which they do it is important, and i think it will be interesting following on from dudley's comments that we had a couple of days ago, talking about a possible rate hike as well at the end of this year. so for me, i think what's really interesting will be how the dollar reacts to it, because seems to me the dollar is trying to form a low, if you look at trade-weighted dollar, it bounced off a significant

low in the last few days. so i'll be watching closely. i think it's important to see what their plans are. it's very important in terms of where markets go and what the dollar gets up to. david: let's look at exactly hat mr. dudley had to say -- monetary policy is still accommodative, so the level of short-term rates is pretty low, and two, financial conditions have been easing rather than tightening. chris, let's talk about that second issue, because it does strike all of us that despite the fact that the fed has raised now more than once, the financial conditions have actually loosened. ow much of that is the dollar? chris: credit conditions have eased. i think as banks have made more money and felt more confident about the economy, they've eased their credit conditions, and now we're seeing a reacceleration of credit growth. the start of this year it was slowing, and that was a big drama for investors.

now it's turning up, and credit is growing going, and that's a gn of a healthy economy, and easing financial conditions. i think it's key. also financial markets. jonathan: soft inflation here in the united states, and a federal reserve that still seems determined about hiking, if dudley's comments are anything to go by. is it a good thing they're not so obsessed or are they missing the point? chris: not at all. inflation is a lagging indicator, not a leading indicator, so it's telling us about the past. it's a lag he frequent that. it's telling bus the credit growth slowdown we had in late 2016, 2015. it's not tell us about the future f. i'm right, the economy is as robust as it seems, inflation will turn upwards, and therefore, the fed needs to look forward and think about that dynamic, and financial conditions are still very easy. jonathan: to some extent they were looking forward to the

five months that played out following their projections, have not played out in the way that many people thought they would. so to be data-dependent, you've got to be dependent on the cat that comes in. it's always going to be backward-looking, and it should shape your thoughts going forward. momentum has to matter, surely. chris: monetary policy operations from the fed, they have to be slightly data dependent, which is backward looking. as we all know, monetary policy akes 12 to 18-plus months to fully effect the economy. there has to be a tension between what they see coming in and what they believe the future holds. they have to balance both of those. but i think inflation will reaccelerate into next year, and i think that's what the fed should be thinking about and probably will be thinking about. david: strikes me we've all gotten pretty comfortable talking about the fed, and as janet yellen said, it's a fisher fed, it's a dudley fed. to what extent should we look at real changes in the fed with

the new administration? i think even as we looked at that news conference yesterday with trump, and see square cohen standing off to the side. shawn: absolutely. that's very important to look at. for the president, i don't know if this is a top agenda line item. i'm sure he has a list. but i think gary cohen is the one devising the list or managing through it. jonathan: worked for dick cheney. shawn: i think it is absolutely very important in terms of how he thinks about it. the names that have been put forward should give investors a little bit of confidence that you're not seeing these ideas, at least not yet. jonathan: get your thoughts on this, chris. i remember the last time around, we were speculating as to who would be leading the fed, and it was larry summers, and it was janet yellen, and the market has made a decision that janet yellen was going to be dovish and that larry summers was going to be the hawk out of the two of them, and how wrong we would have been if larry summers would have been the fed chair, gven his current thoughts on monetary policy and economics. but where's the bias right now

for the market, for janet yellen getting another term and what that would ultimately mean, and if gary cohen got it? chris: my understanding is there's a tiny bit more hawkish than janet yellen, but fairly pragmatic. in reality, i actually think that both candidates are way off where they should be. there's too much liquidity provision in financial markets from central banks starting with the fed and rolling out to the rest of the world. and that, i think, is where we fail in terms of big-picture economic policy. at the margin, perhaps a tiny bit more hawkish, although he's pragmatic, he's ex-goldman, so he's from the same sort of stable as many of the guys we've seen come through the fed. i think net-net, the difference will be small, and i don't think you'll have a significant impact on markets, if i may say so. we need to change the way the monetary policy is operated in a meaningful way, but perhaps that's a story and a debate for another day. jonathan: wouldn't you rather

be standing in the news conference of yesterday or just in the fed doing some research, getting ready for a news conference in a couple of months' time? david: i'd almost be anywhere than at the news conference yesterday t. didn't look that comfortable. jonathan: i'm sure they'll stick with us, since chris is staying with us as well. coming occupant program a little bit later, the co-head of global fixed income will join us, u.s. high-grade debt this year topping a trillion dollars. we're going to get stuck into that market in just a moment. from new york, you're watching bloomberg tv. ♪

emma: this is bloomberg daybreak with your business flash. target is forecasting full earnings that beat estimates. the chain also reported second-quarter comparable sales that were better than expected.

the c.e.o. has $7 billion turnaround plan aimed at refurbishing target stores, opening smaller locations, and improving the online business. uber is in exclusive talks to arrange up to $12 billion in talking from foreign investors, according to people familiar with the matter. those investors include japan's soft bank, china's giant, and u.s. equity firm general atlantic. but the deal hangs on the outcome of a courtroom fight between two uber board members. that's your bloomberg business flash. jonathan: another day, another debt issue n. 2017, seven companies alone have issued more than $108 billion worth of bonds, with at&t some of the biggest debt at $22.6 billion for its $84 billion takeover of time warner. the focus on amazon. the tech giant has issued $16 billion in debt to pay for its acquisition of whole foods, which was said to include a 40-year security with a yield of just 1.45% above treasury. joining us now from princeton

is bloomberg intelligence director of credit research, and chris joins from us london as well. i want to begin with you, and i think it's important that we don't just talk about how low yielding some of these securities that amazon came to the market with actually are, but also how much tighter in some spaces and some places on that offering, they're already trading, so that if you bought them actually you're doing ok. i know it's early days, but it is a story worth paying attention to. >> yeah, sure, i think a number of the issues -- it's only a couple of basis points tight air cross much of the curve, at least in early trade, so it's not like big moves to 5 or 10 because points, but given where they came, that's not too surprising. but it does speak to the fact there's a ton of demand and people that need to make sure their index is relative to the paper. so certainly there's followthrough to come on that. jonathan: just thinking about this, one thing i've spent the last week really thinking about as it came to the market, as amazon comes to market, these are companies with really, really strong valuations in the

equity market. i just wonder why they're choosing to come to the debt market instead of raising equity. why is that? noel: well, i think a lot of these guys historically are very nervous about diluting shareholders, not least because shares are a big part of the compensation package, which helps save cash flow for both companies. tesla saving cash flow is a pretty important thing. amazon, you have a lot of cash trapped overseas, but again, shares are a really big part of the compensation package. again, if you're able to fund long-dated paper in the mid 4% range, then you get the tax deduction on top of that, pretty compelling just from the cost of capital standpoint. david: give us a sense, how much of this fairly extraordinary ability to fund is a result of the anticipation of the markets that these companies will do very, very well and note this is not just amazon, it's also at&t with a huge deal to buy time warner. how much is it that they think the future is that rosy, and how much is the liquidity that the central banks have injected

into the system? chris: obviously amazon is a great company, and so is tesla. but primarily it reflects the fact there's so much liquidity out there. we had long-dated paper from mexico not that long ago. we had very long data paper from -- i forget which sort of emerging market it was, but the sort of place you shouldn't be putting money at low yields for long periods of time in. there's a lot of liquidity out there, and investors are still on this hunt for yield, as financial conditions are very loose. so they're snapping it up. jonathan: many of the big investment houses come out and warn and caution about the credit market, and not just the confidence, but how big the books are for some of these offerings as well. just talk toe me about the appetite still for high-grade credit in the united states. noel: well, i think we just hyped that, which is there's a ton of electric quid thity out there. it's hard to do a deal, unless

you're in staples, every deal, even in the high yield space, has been pretty well subscribed. there's just a lot of liquid, and knowing that's really interesting, we've seen average do you upons near record lows now, even as average maturity has reached back to record highs. so it's not only doing the funding, but it's doing it at lower rates and longer duration for a lot of issuers. jonathan: really smart. appreciate your insight. noel and chris, chris will stick with us. later in the program, coming up next, ambassador antonio garza, former u.s. ambassador to mexico, and he joins us as nafta negotiations or renotion talks commence. from new york, for our viewers worldwide, you're watching bloomberg tv. ♪ got you outnumbered.

the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.

find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. jonathan: this is bloomberg daybreak. i'm jonathan farrow. let's whip through the market action for you. futures are positive. we had two days of gains followed up by a bit of nothingness yesterday, a flat close on the s&p 500. futures are positive this morning, up five or six points

by about .5%. the ftse 100, the dax, decent territory as well this morning. we had over 100 points to the dax, 53 to the ftse 100. the story elsewhere, switch up the boards, the x.x. market, are outperforming. but the euro-dollar coming down by a third of 1%. some suggestion by righters this morning that president draghi's speech in jackson hole will not be a news-making one. for the cable rate, interesting, because unemployment hit a 40-year low. wage growth was decent, too. and the sterling still struggled to catch a bit, at 1.2862 at the moment. yesterday treasuries were very much up after the really strong retail sales. today, pretty stable, 2.27 is your yield on a 10-year. let's get you up to speed on headlines outside the business world. emma: thank you, jonathan. president trump has pivoted back to his original

controversial position on the violence in charlottesville, virginia. president trump: there's blame on both sides. you look at -- you look at both sides. i think there's blame on both sides. and i have no doubt about it. and you don't have any doubt about it either. emma: at the news conference in new york, the president said what you called very, very violent liberal protesters who confronted white supremacists. later the white house asked republican lawmakers to defend the president's markets n. alabama, there will be a runoff for the republican candidate in the u.s. senate race. incumbent luther strange, who was backed by president trump, will roy moore. strange was appointed to fill the senate seat that had been held by attorney general jeff sessions. the u.k. says that a physical border after brexit is completely unacceptable. the brexit department says negotiators need to show flex sandibblet imagination when it comes to the border between northern ireland and the republic of ireland. the british goal is to preserve

free movement of people and goods given the troubled history. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david? david: i can't think of a single issue to bring up with investors that frustrated them more than brexit. we know the solution now. just not creative enough and imaginative enough. they have to show some imagination. jonathan: oh, apparently -- i understand technology is going to solve this. we're going to have virtual borders, but they will remain borders. in about 10 minutes, we're going to discuss brexit. but it is a frustrating experience for a lot of people that are on the side of it. david: pretty extraordinary. in the meantime, nafta negotiations get underway in washington today, and coming from the scene of the negotiations is our chief washington correspondent, kevin. kevin, set the scene for us. it looks pretty foggy, first of all. but where are you? what's going to happen today? kevin: it's a foggy day in washington. we're here in washington, d.c.,

where nafta negotiations are set to begin at about 9:30 later this morning. we're going to begin hearing from the trade representatives from canada, mexico, as well as usta trade rep. of course, all of this comes as there have been intense back and forth between mexico and the united states, particularly over funding for the security wall along the u.s. and mexico border. we should note that when lawmakers return from congressional recess in august, in september, when they return, they have 12 legislative days, david, in order to first and foremost raise the debt ceiling, and then, secondly, pass a partial government funding bill in order to avert a partial government shutdown. now, included in that bill could be the wall along the u.s.-mexico border, and that could pose some political risk for lawmakers as they head into september. expect some of that to be included in these discussions today, but whether or not these talks are conciliatory or combative, we'll know very short in the next couple of

hours. david: we hope the fog is no indicator whereof they're going at this point, so thanks very much, kevin. we'll come back to you later. now, for a unique, a truly unique perspective on the nafta negotiations, we're joined on the telephone by antonio garza, former u.s. ambassador to mexico, and now consul to the international law firm. he works in their mexico city office. welcome to the program, ambassador garza. good to have you here. still with us is shawn golhar of barclays. mr. ambassador, you are in a unique position. you are from texas. you had government positions in texas. you are, in fact, the grandson, as i understand it, of mexican immigrants. you are a republican who represented the united states in mexico. what is your perspective on what's going on in washington today? ambassador garza: first, good morning. i've actually been a bitten couraged so far, although -- i've been a bit encouraged so far, although i think we'll get a better sense. if we opened these negotiations shortly after the elections, the air would have been of a prize fight. now there's a bit more

encouraging signs. businesses coming to the table, and the countries have realized over the course of the last 20-some-odd years, we really have very grated our economies in ways that have been positive. so whether or not today is a largely technocratic exercise with some sense of setting time lines and narrowing the subject matter a bit, i think i'll be encouraged by that. if it moves too quickly to the olitical arena, where we start again debating with the tone of the last campaign season, that would be discouraging. but so far, i think the environment has improved over the course of the last year, and so, you know, this is day one. but it has a better feel than i would have imagined just a few short months ago. david: so ambassador garza, listening to it from the outside, it feels like there's two al determine tizz. one is some revisions, some modest changes, some updating that really makes sense on the one hand.

on the other hand, a president. united states is saying we've got to really address this trade deficit with mexico. can those two things be done at the same time, or are there two alternative courses here? ambassador garza: well, that's a very good point. at end of day, we're talking solely in the united states about manufacturing and jobs. then i think it will give you some tell as to where the negotiations are head and had how difficult it will be. those are -- in many respects, ry nuanced topics, where one appreciates the change in the environment and how different the manufacturing platforms, how they have evolved over the course of the last 20 years or so. if, on the other hand, the discussions are very forward-looking in talking about energy and the integration of our energy markets in north america, or the protection of intellectual property, or issues to do with a digital economy, then i think

you'll get a sense that the negotiators, while trying to address manufacturing jobs, trade deficits, getting into issues of rules of origin and these sorts of things, but the tone is more forward-looking. i think we'll all be better served. david: sitting in new york, the united states, we have a tendency to look at that time from the united states' point of view. give us the mexican point of view, you have lived for some time in mexico city. how much maneuver room does the administration in mexico city have to make concessions, whether it's president nieto or looking forward to the next election? ambassador garza: i think increase going it narrows, because of the election time table and the expectations that they have set with respect to getting to some sort of agreement by the end of the year. i think the mexican leadership did a very good job early on in

terms of framing this as more than a discussion about trade and a discussion about an overall relationship that includes such issues as the need to work cooperatively on security, on immigration, on those sorts of issues. so i think their window starts to close a bit. now, things that are viewed as outright concessions are going to be very difficult. things that are not starters are clearly issues such as the wall. so, you know, i think they all come to this with some limitations, so tone throughout this discussion is going to be very important. david: you've studied this carefully for barclays, shawn, and what is your assessment of what of gives and takes are? shawn: from the u.s. side, it really is to lower the deficit. the president said that the usta. from the mexican side, yes, the wall is a nonnegotiating starter, but how do they feel

about narko terrorism? it's an enormously long bothered, very complicated, and the u.s. and mexican authorities have worked well. all the illegal immigrants that come through latin america, south america, they get stopped by the mexican authorities. is the mexican government going to use those negotiating points as they come forward to the americans? i'd love to hear from the ambassador on those issues. david: mr. ambassador? ambassador garza: i think those sorts of points are going to be implicit. i think it would be a mistake to be too explicit or too overt in terms of using those sorts f things as leverage points. i think you've seen them talk about those things in a very general sense over the course of the last months, as recently as last week. but i think being too explicit about that would probably not be a good approach. shawn: in terms of not being too explicit, how do they feel about the president of the u.s. tweeting about the issue as it goes on, if he says something

that's inflammatory, will they take that as just political rhetoric, take that as too overt, or will they think to themselves that's really the position for the ustr? ambassador garza: that's a good question, shawn. i think a lot will have to do with the nature of the week. there has been -- mexicans, i think, have become much more sophisticated consumers of american politics. and if it is a technocrat i can exercise that is largely driven through the meetings, through the cadence of meetings every 10 or 20 days of whatever is anticipated, they'll be able to discount somewhat the occasional tweet. but if it's one of these -- if it's the green grade over the transom, it will become more difficult for them to have that out there. again, because there are certain things that are very inflammatory that would

complicate things for the mexicans. david: many thanks to antonio golhar. shawn jonathan: news on gary cohen, now with the white house, formerly of goldman sachs. maggie of the "new york times" reporting that gary cohen is said to be deeply upset over the last few days, according to multiple sources, not leaving the administration, but certainly not happy, and part of it is the actions of the president of the united states. the other part is the concern of the agenda, especially tax reform, and how it could be stalled permanent. gary, as maggie pointed out over at the "new york times," had a follow-up news conference to the events of yesterday, answering questions about infrastructure following the president's remarks on something that was certainly not reeled to infrastructure. so certainly some difficulty within the white house. david: and i'm not privy to the thoughts of gary konn, but the president said mr. corning you get tax reform done, that's your job. and then we keep having these

distractions. it must be frustrating. jonathan: we talked about how the c.e.o.'s are distancing themselves from the president of the united states, the councils. do you think there are others in the white house, never mind the c.e.o.'s outside the administration, but some inside the white house right now that are very, very, i don't know, got a very sour taste in their mouth from the last couple of days and rethinking their future? shawn: i'm not privy to those conversations, but i'm sure that's the case. that's always the case in any administration. look, there's different factions in any white house. i think in this case, it seems to be a bit more divided i think from the outside as some of us look at it, but to be honest, they are coming forward on a lot of their own views, executive orders from the president, whether it be on issues on china, on issues from the department of justice, and they've seemed to be quite unified. we're not seeing people like mr. cohn and others giving speeches that show them contrary to the administration's policies. david: once again, thank you so much for being here, shawn golhar of barclays. later today, i'm going speak with former commerce secretary

carlos gutierrez. that's coming up at 1:00 p.m. eastern time this afternoon, live from new york and washington, this is bloomberg. ♪

emma: i'm emma chandra, here in the hewlett-packard enterprise greenroom. later, chairman of the house ways and means committee, kevin bready, joins us at 12:00 p.m. eastern. this is bloomberg. jonathan: the united kingdom wants to avoid any physical border or customs customers as part of the brexit deal with the european union. the e.u. has called britain's papers a "positive step." joining from us london is

bloomberg's brexit editor, and still with us is chris. simon, let's talk about what we've learned in the last 24 hours, if anything at all. simon: i think the main thing is that the british are still trying to assemble a position on a variety of issues. customs was the issue of the day yesterday and perhaps today as well, today more narrowly focused on islands. but the takeway is that the u.k. kind of wants to keep the status quo as much as it can, and whether they'll be allowed to do so will be a big test in the coming weeks as talks with the e.u. reconvene. jonathan: put together the history of violence and the connection with the united kingdom. this is the only land border with the u.k. and the european union. put together the history of all of that, together with the modern-day needs of the e.u. and the way they think about borders. simon: i think we'll need a longer show to go through the history of items, and perhaps a multiweek event. obviously one of the issues

that has been kind of revived from the brexit talks is that deal that's up there, historical differences on the island, the idea of having hay hard border raises memories of british rule from the past, of borders that were attached by republicans in the past. it has a symbolic problem to many, and certainly that kind of undermines a lot of the conversation, underscores a lot of the conversation regarding the irish border. and then from a bigger, wider european point of view, it opens up issues about whether we can just have a land border, a small land border between the e.u. and u.k. once outside the u.k., the french already concerned that it could have provided a easier access for u.k. goods into the e.u. others are concerned that it will be porous. and so some disagreement about just what that border will look

like in the future, and obviously something that they need to deal with, the brit rich going to talk about trade talks before the end of the year. jonathan: the e.u. repeating once again today the click is ticking on negotiations. i wonder whether there was some incentive for the e.u. to watch that clock tick and run it down . and as we get closer to the time, they get the deal that they want, and the u.k. maybe doesn't get the deal that it wants. is that where this is going, and for investors, do they just sit and here wait and watch this play out? simon: well, it's very difficult to read, isn't it, because there are different factions on the european side, making different signed of noises. if you listen to the german manufacturers, they want the german government and, by proxy, the e.u., to get on with it. you know, it's a hard call, and i think ireland is one of these sort of symbolic, technically difficult issues, a bit like begin alter that ultimately probably isn't as important as

we think it is, and what really matters is getting on with the trade deal, which we've had some very positive noises on in the last 10 days out of the british cabinet. jonathan: do they have any positive noise ots sides of the divorce bill? chris: again, i mean, these numbers seem big, but ultimately, you know, the range, we'll probably somewhere in the range of 40 to 70 billion, i would guess, and actually that's not that big a number, particular physical we stay on a transitional deal for three years, which will probably cost us $10 billion to $12 billion a year anyway. really, i think the key is getting to the negotiation on the trade, working out where we go from here, and it's perfectly possible that a good deal can happen. jonathan: the irish minister saying lots of unanswered questions on brexit, david. david: i think there's something there, very per seb active, thank you. thank you so much, simon and

chris, and chris, you're going stay with us. if ulf a bloomberg terminal, watch us online, click on our charts and graphics, and interact with us directly. just go to tv go on your terminal, and maybe we'll answer some of the brexit questions. live from new york and london, this is bloomberg. ♪

zwroip is one of the unsung outperformers of the market this year, gold. it's up over 10 percentage points in 2017. joining us, the man who's been long gold all year, chris watlin of longview economics. i want to get through this. chris, no longer, long gold. walk me through it. chris: that's right. i think it's become a bit of a consensus, particularly on the north korean news over the past weekend. that's clearly quieting down. and, you know, i think a good reason to think that really what gold is about is real interest rates. and i think real interest rates in the u.s. are going to be

going higher hire. we'll come to that, and all of that is negative for gold. so i like the u.s. economy. i think it's going to get a bit of traction. and i think it's a time to dump gold and call it a day. jonathan: for a lot of investors who are looking to risk and go into somewhere like gold, what's the argument against that? chris: well, you should always have a little bit of gold in a broad, diversified portfolio. but there are times when it's going to go down. so if you want to divest, fine, but it's not the best place to diversify in terms of adding performance. i think when the u.s. economy delivers strength and the markets start crashing and more rate hikes in the u.s., which i think it will in the next few months, gold tends to do poorly. i wouldn't bother having any personally. david: so, chris, you've said already, i think the dollar will rise, and you think we should be long the u.s. dollar. is that based on some technicals? we saw some technicals last week that said the dollar would

come up, or are there fundamentals that would drive that going forward? chris: i think both. technically the markets become bearish the dollar. it's become the sort of crowded short now instead of the crowded long as it was it the the start of the year. and flip it on its head, everyone loves europe, they love the euro. 245e789s the most popular trade if you look at some of the fund managers. so, you know, i think the u.s. economy is about to reaccelerate, there's traction there. look at the cap ex intentions. and, you know, dudley tightening the fed balance sheet, all sftsdz starting to tightening monetary policy again, and dollar is at a key level. i think it's attractive here. jonathan: when pink proxies for china, i usually think about copper. if you're bearish china, it's time to get short copper. interestingly, you are thinking about going short copper. you are. i just want to you walk me through the why and the connection with china and what you're seeing in the economy. chris: again, it's a mixture of technicals, but it's also a

mixture of fundamentals. if you look at chinese housing, we had a bit of a tightening early this year. you remember they tightened up liquidity and rates are up, and a lot of macro credential on housing, and we've seen that. we have a result in the chinese housing market is over. transactions in china actually contracted last month for the first month of many, and that tends to be a good leading indicator. prices are topping. so, you know, if chinese housing is coming off, transactions are off, completions are down, copper usage will also come off. so i think technically it's an interesting short. but the fundamentals are there as well. david: if the property market is coming off of china, how big a problem could that somebody that could go well past copper into larger issues of the global economy. chris: yeah, for us it's part of a theme in the peak of global reflation. so, really, from february last year through till some of this year, reflation global has been driven by china, pked up by europe, and joined in by the u.s.

and i think if chinese housing is rolling over, the chinese economy is probably peaking, and that will play into europe. interestingly, if you look at european equities, despite the fact that every man and his dog thinks they're the place to be, they've been underperforming since may. so, you know, there are effects. so, you know, i'd say the u.s. equities, frankly, in the global mix, and also, i think equities will feel it. jonathan: great to have you with us on the program. chris watling, joining from us london. coming up, we couldn't you down to the opening bell. that's about one scommour 34 minutes away. you're watching bloomberg. ♪ ♪

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virginia violence, taking away from his legislative agenda. amazon added to the one trillion of high grade u.s. trade bonds issued this year. investors looked to federal reserve minutes for clues on how soft inflation figures might affect their next move. good morning, good morning. .his is bloomberg daybreak i am jonathan ferro, alongside david westin. alix steel is on assignment. .2.s&p 500 up by euros softer by .2. this following a report that may be president draghi speech in jackson hole will not be newsworthy and treasuries are stable after being up after that strong retail sales data points. 2.27 is your yield on the 10 year. david: we will get u.s. housing

starts and building permits for july. talks between the united states, 10 a debt and mexico get underway with the first round at 9:00 -- canada and mexico gets underway with the first round at 9:00. and at 9:30, nafta negotiates kick off washington. and 2:00 p.m., the fomc will release minutes. pepsico was pressured to walk away and under armour got pushback when they did that. keep fortores inc. to a few keen trump and not severing ties as three more members of the advisory council resigned on tuesday. joining us is marty shanker, a senior executive editor. it was a busy tuesday, where do we go from there? next: let's see what the 10 minutes brings. donald trump has been tweeting,

and going after amazon, just done before, which is the owner of the washington post. amazon did take a quick hit but recovered. the issue was not without some substance. they have been in tax trouble in europe and there retailers who think they have an unfair advantage. david: didn't amazon say they would be in favor of federal internet tax or something? marty: they did and have begun collecting sales taxes in every state that has on. they have been trying to thread the needle. donald trump bringing it up in a tweet might not mean anything for them but it does bring that issue to the forefront. david: does it mean anything to the president he is losing ceos? does he care? marty: he says he does not care and there are tens willing to take their place. any president that alienates the business community, and a

president who describes himself as her business, is not a great -- as pro-business, is not a great place to be. he is not happy about it since he lashed out at merck ceo and others, so it isn't good or him or his agenda. david: i cannot believe how many times you say twitter or tweet in a program. a short time ago, the president tweeted about north korea, saying their leader made a wise and well reasoned decision, the alternative would have been catastrophic and unacceptable. he is referring to yesterday. his third daylight in our crisis with north korea? trump thinks of the compliments the leader of north korea, he can get him to calm down his nuclear ambitions. i'm not sure it will be enough.

our own reporting on the north korean statement left and acuity as to what the north koreans have in mind westmark don -- in mind? donald trump is signaling back. unclearit is a little just how effective that is going to be in terms of defraying their nuclear ambitions. david: unclear and north korea seem to come together. thank you, already shanker. jonathan: joining us now is alan rechtschaffen. looking at the situation with the white house at the moment, reportingrk times that gary cohn is upset, not just because of the reactions of the president of the united states, but how tax reform agenda could be stalled permanently. as you look at the situation, what are you thinking? >> our thoughts are probably we

will see something in terms of tax reform in september and that should get juices going, especially in congress, but with the president's scandals and does complicate things for the white house and makes it difficult to advance the agenda. david: does it make a difference? is this noise the media consumes or is it making a difference? for example, in the likelihood of tax reform? alan: the markets have been fantastic. you have a market that keeps going up in spite of the nuclear , stagnationnrest and legislation, so we have a stock market supported by central banks and i think it makes a difference but the markets seem resilient and we have to ask, why? with the lot has to do central bank intervention and i think you have a federal reserve and global central bank that

anxious to take away the punch bowl. even in terms of normalization policy, you have a fed that will put stronger alcohol in place of the punch bowl because the process of rejiggering the balance sheet includes buying bonds for a long time. jonathan: that is one thing, but many people in the market were waiting for performing washington, d.c. oft week, we had a selloff high intentions of bad mystification between north korea and the united states. -- bad communication between north korea and united states. alan: the question is, can the president get the tax agenda going? the markets are telling you they believe corporate taxation is something that is doable. it is a possibility that we have real tax reform, a republican

republican senate, and that is a recipe for good things when people can work together. jonathan: that sounds great, but we have learned that yes, it is a republican house and senate and white house, but there are three republican parties not on the same page. alan: the devil is in the details, you are right. health care, for instance, president trump's observation that nobody thought how tough it was, i think you will have leadership in the house and senate that will support the president's agenda that will move the tax agenda forward because they seem to be on the same page. economist,, as an how do you see it? is a connection between the economic data and what we see in washington or are they parallel play? dana: more or less parallel.

we are not seeing reduction in spending. we see that car sales picked up after weakness earlier this year, and they have peaked, but people are going out and shopping. consumer expectations are high. people not making that connection to what is going in washington -- going on in washington to their wallets. david: may there be a different connection in the sense that we hear sometimes corporations are hesitating to make investments because they are not sure what is going on with tax reform and infrastructure? visit curtailing capex? ana: absolutely. businessesrisis, have not been involved in expansion. where they have, it has been nit, -- been in i.t., and into stock buybacks and larger dividends, but they had

not been investing in gdp enhancing activities. the hope is deregulation and tax reform with incentivize businesses to do that. we believe there is holding back that is persisting because businesses are waiting for washington to execute on tax reform. jonathan: we talked about how this is a pro business ceos areation, but more moral than bottom lines and profits. is this becoming less of a pro-business ministrations?in the beginning , -- pro business administration? in the beginning, in has changed radically. administrationhe 's pro-business. there is a focus with nafta negotiations beginning today. focus onan intense deregulation.

yesterday, the president signed an executive action on allowing easier permitting for different infrastructure projects. as a ceo, you have to be concerned about your image and the one you are per train for your company. i think -- per train for your company -- portraying for your company. i think businesses want to have washington move forward with all the things it says are pro-business but dealing with the perception from their constituents. david: alan rechtschaffen of ubs and dana peterson of citi, you will both stay with us. coming up, dan crippen will talk about what happened to obamacare under the trump administration. od willing up, duncan woul talk about nafta negotiations beginning this morning in washington. live from new york, this is

bloomberg. ♪

david: this is bloomberg. i am david westin. the fomc met last month and today, we learned about what they talked about doing when there meeting minutes are released at 2:00 p.m. still with us are alan rechtschaffen and dana peterson. how important are these minutes? and of the two, inflation data or the balance sheet, which is more important? today's minutes will be very important. we expect markets to react

strongly of any mention on thoughts of inflation or currency, and most importantly, the balance sheet. i think that in terms of inflation, they will be focused on that. we have had repeated mrs., certainly lost friday, on the headline and core inflation. the fed is banking on the fact that we will have transitory factors that will go away, and once it happens, we will achieve the 2% target, but how long do we keep missing before fomc members worry? david: you up with the fed, how nervous are they getting? i do not know about nervous. the data is right. it is something else, and i think that what you have is a situation where the federal reserve is reacting and they are data dependent but they have an

agenda to reduce the balance sheet. i think people misunderstand the policy statements they made because they think it is an instant rising interest rates and that is not the plan. the yield curve has fund. gary flat -- has flattened. gary flat -- very flat. the balance sheet continues to allow them to purchase bonds. going to be buying more bonds over the next year than they have for the past five. jonathan: the reinvestment of those bonds is going to change. right now, it is dependent on what the treasure comes to market with over the next years and it will be translated the -- frontloaded because it doesn't make sense to reinvest at the long end, so the policy will change and shake the yield curve

to radically. alan: you are right, except now, the policy of the federal reserve is to buy whatever bonds are action. the treasury is aware of the balance sheet runoff of the fed and can issue 100 year bonds when they are due. now, you have a federal reserve that because of shortening of the duration of the balance sheet and lengthening the duration, has numerous bonds and can invest them along the schedule that the treasury announces in terms of what they will auction off and they can be long bonds. dana?an:, your thoughts, dana: we thought this would be a be nine process but colleagues stressed it could be messy, itsg with ecb ending program and it could be disruptive. i think the fed is aware of the wek and that the treasury

met with, we had talked about how this will work out, and there are questions that need to be answered. we think this should be a relatively smooth process. david: many thanks to alan rechtschaffen. dana peterson will stay with us. coming up, we will talk to jonathan beinner. live from new york, this is bloomberg. ♪

emma: this is bloomberg daybreak. target is forecasting for earnings that the estimates. sales were better than expected. the ceo has a $7 billion turnaround plan into opening more smaller locations and improving the online business. target is up 4% in

premarket trading. wells fargo has named a former fed governor as its new chair. she will have to deal with the fallout from various scandals. wells fargo admitted to opening millions of accounts without customer permission. more scandals erupted in their loan business. uber is in talks to arrange funding from investors. those investors include japan's softbank, china's ride hailing giants and general atlantic. it hangs on the outcome of a courtroom fight between two uber board members. jonathan: don't you like the house video for uber are nice cars when you get a tale of the camera. david: if you are lucky. camry.get is a toyota david: if you are lucky.

i guess you have to pay more. jonathan: another debt issue. seven companies have issued more than $108 billion worth of bonds with at&t selling their biggest .ebt of the year the focus is on amazon. they have issued $16 billion in debt to pay for the acquisition of whole foods. just 1.455 -- percentage points above. column, your latest bonds with an equity story. not just amazon, but tesla doing the same last week. >> the best you can hope for is you will get your money back with a coupon with respect to history. if you are going to buy this, you are hoping to get your money back but you are being sold on the story being sold to equity investors that amazon will dominate.

jonathan: why is it being reflected in the bond market when people are warning about credit and evaluations? yet, these issues are tight spread. lisa: it is a $16 billion bond offering. that is equity at that point without the upside. basically, who predict what will happen or what amazon will look like in three decades for decades? the crazier thing is, this is demand. because theyamazon want to match up maturities. if you look at the long picture, and they say, we do not see well, ifcelerating, you get less than 4.5% for 40 years to own a piece of something that might be the dominant player in retail in the future, that doesn't look bad. david: how much is it amazon and

what is the alternative? -- last time i heard, is not called sexy. lisa: [laughter] definitely not sexy. david: how much is appeal? lisa: people are sold that amazon is the behemoth in the room. if you're going to buy something, you would rather own amazon than at&t. amazon is on sense to what people think is unstoppable. fullback into the index story and how well -- fall that into the index story. lisa: how much are these big offerings being driven by the fact that the more debt companies issue, the more investors want to own it? it is a perverse cycle because the bigger offering is the

bigger constituent it is in the index, and it is a distortion it amount of their -- eight disproportionate amounts of their cash. david: talk about how the banks are making out. lisa: very well. david: is it gravy for them? bonds paystment grade less than high-yield ones. there have been high up bond issuance is. david: do they have to make up on volume? lisa: with respect to the trade and size, yes. it is pretty good when you are talking $16 billion and it was a story about how goldman sachs and others have been offering bridge loans to some of these companies with earnings season a site. this is a great the trade. jonathan: holiday trading after issuance. lisa: i would guess up. not just amazon.

we had tesla last week. tesla went down. which does not surprise me because tesla is in a worse position than amazon. not only are they burning through $1 billion of cache, it has not proven they can manufacture cars on a timeframe and they stripped out protections in terms of battery sales. jonathan: not quite investment-grade on amazon, it is, but only by a few notches. the investment rating company sees risk here that investors do not. it is rated at the top tier of the triple d rating for movies and has positive -- moody's and has positive rating and you have a higher one for s&p, so you have people saying it looks good and they will pay it back. jonathan: who knows what it will look like in 40 years?

lisa: how about 10? up, we will beg joined on nafta. the opening bell is about one hour and change the way. futures are up. positive .2 on the s&p 500 after a flight day yesterday. phone in europe. the ftse up .6. some stability in the bond market after that start retail sales in the united states. york, you are watching bloomberg today. ♪ -- bloomberg tv. ♪

city,an: from new york this is bloomberg daybreak. about one hour away from the open. futures up, positive. we closed flat yesterday but

gains across europe. the story elsewhere in the fx witht, cable softer, even a decent performance. unemployment at a 40 year plus low. sterling struggling to catch a bid. get you those housing stats and united states. -4.8%, a downside and a significant one for the month of july. we were looking at 4%. the previous number revised, as well. told impermanence down -- building permits down for the month, as well. higher tous month was 9.2. altogether, it adds up to month-to-month for housing stats [no audio]

a downside surprise, is this telling us about the health of the direction of the us economy? dana: looking here, it looks like most of the week's multifamily. it can be volatile but single-family, overall, is pretty much unchanged and in terms of permits, also unchanged. we still see healthy starts and permits for the single-family market. i think it is important, certainly for retail discussion. retail sales were strong yesterday across the board. we are seeing millennials are starting to get into the action. jonathan: they are starting to buy. dana: they are. they had jobs, they have moved out of mom and dad's house, and formulate families so they are looking for their starter homes. inare seeing some increase

demand for single-family homes, especially the more affordable homes. see momentum in the housing market from that segments. jonathan: what this the financing picture look like from the big banks and united states? dana: financing has become easier relative to figures years ago. the key thing for millennials is that many have not been able to save. i think financing has improved and it should help that court. jonathan: there was a man in australia who blamed avocado toast for millennials not saving. [laughter] which sounds ridiculous. david: i have never had avocado toast. this demographic trend, mike that partially explained -- might that explain why we have been disappointed in wage pressure? if you have a be bloomberg -- baby boomers going outs, mike

that explain the lack of wage pressure? dana: some of that is a factor. there are so many reasons. number one, businesses do not feel incentives to raise wages. people are not asking for those wage increases. we also have labor shortages, where you have companies are advertising higher wages to attract people but the cannot find that right skill match. higher wages are not necessarily been realized. going back to millennials, yes, they are starting at the bottom will see lower wages because they don't have experience. david: we have been talking about wages, workers and mexico because a lot of issues the president has is with mexico and that brings us to nafta, starting negotiation's today. we are joined by an expert in

u.s.-mexico relations, duncan d.c., andashington, dana peterson from citigroup will stay with us. set the stage down there. what is the gold of this round of negotiations? dayan: this is an historic and i know we over use that term but this is a day we have been waiting for since november last year. even if you go back before that, a the summer of last year, lot of us in washington were gathering and saying, we will need u.s. administration coming up, we do not know what it will be, but this is an opportunity to look at nafta. ones,was one of the first but it is stuck in the 1980's and reflects the 1980's, early 1990's economy and it has

changed since then. what we will see in washington today is an opportunity to modernize that treaty. maybee got at least two, three, radically different visions of what it should be. on one side, mexico and canada have a similar vision of what they would like to see from a renegotiated nafta. the united states government on the other side is stating that it wants to use this to reduce u.s. deficit and pretty much of the economy i know and mexico and canadian governments are saying, you do not reduce deficit through trade deals. you reduce deficit by increasing competitiveness and saving at home. i think we have a potentially have the contentious discussion today. david: the president seems to want, one, a past deal and a good deal.

he says deals in the past are terrible. can he do a vast good deal? -- fast, good deal? duncan: i see that as difficult. we might have to come to a decision between whether we get a great deal for everybody or a fast deal. a vast deal would not be so bad -- fast deal would not be so bad as long as it is not upset the last 20 years or so. mexico and the united states said they want to get it wrapped up by christmas or january next year. the original agreement to more than two years to negotiate. we are trying to add in e-commerce and the digital economy. i think we are going to have a tough time in getting to yes. jonathan: many economists have embraced economic equilibrium -- equal is some and say it is hard

so what is it in a place like mexico that they are looking to address?what are the trade policies they think are unfair? duncan: your point is well made. the transformation of mexico has gone from being a highly closed protectionist economy to one of the most open in the world. mexico has free trade agreements with more countries than anyone else in the world. we have seen a reversal between the united states and mexico since the original negotiations took place. there was an event at the wilson center yesterday and there was one area where mexico could to theo make concessions united states, and that is not on tariffs because they are zero for most products, but on non-terrorists and -- non-tarif

fs. if mexico was to say, we some burdenedave environmental laws and we will work with the united states to reduce those so u.s. firms have an easier time exporting to mexico, i think that will be a win. the most important one is that mexico is a market for the future and for now. remember that the average age in mexico is 26. you had this as a potential demographic bonus for the entire region of north america, so it is about looking to the future and today. david: the u.s. economy is growing some and we wanted to grow more. what are the opportunities in a renegotiated have to and the risks to the u.s. economy? the: good job of administration is to get that better deal for the u.s., so

that is why there is a focus in restricting canada and mexico from having advantages over countries and with respect to have them over domestic producers, especially with how they access the government procurement contracts, as well as exempting mexico and canada from the snapback tariffs. there definitely is potential for the u.s. to get that incrementally better deal. however, if we annoy our neighbors and make it much more difficult to have trade and it was not mentioned, but implements imports of canadian and mexican goods, that we can really damage the economy in terms of reducing trade within the region, globally, and creating greater inflation for u.s. consumers. ask, why i went to this administration considers

trade deficit bad? and the point of the conversations is the basis of the conversation that trade deficits are bad? our trade deficits bad? are theyade debt -- bad? run, they the long can be. but do you reach that balance, not just focusing on trade, and do you have that balance when you look at trade on a global basis? one of the things i think is extraordinary in north america now is the united states is obsessed with reducing the with mexico.s mexico has a population that is 1/10 the size of china, yet, it americanwice as many goods as china. this is an enormous market for the united states economy and it will only grow in the future. the united states should be

focused on fixing other relationships rather than the one with mexico and doing so in a way which emphasizes north american competitiveness. u.s. firms benefit, it has been proven, from a competitive advantage from integration change it mexico and integrated production chains with mexico, to lower their costs and compete in the global economy. jonathan: duncan, thank you for joining us. duncan wood at the woodrow wilson international center. dana peterson, thank you, as well. we will cross over to emma chandra. emma: we are looking at live pictures of trump tower in new york, where he pivoted back to his original controversial opinion on the violence in charlottesville. present trump: you look at both sides, i think there is playing on both sides.

i think there is -- i think there is blame on both sides. ita: the president called very violent liberal protectionist confronted them. meanwhile, president trump is sounding conciliatory note to north korea's leader, apparently referring to his decision not to launch and missiles toward guam. president trump said the decision would have been catastrophic and unacceptable. queen elizabeth has arrived in southern england. tens and thousands of people welcomed the ship. left the shipyard in scotland. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. jonathan: thank you.

coming up, dan crippen will join us in new york city as we count you down to the opening bell about 50 minutes away. from new york, with futures positive, you are watching bloomberg. ♪

emma: this is bloomberg daybreak. coming up, goldman sachs asset management cohead of global fixed income. this is bloomberg. bloomberg business flash. truce.el has called a elliott management will suspend

indication for three months. akzo says they also back elliott's new ceo after they rejected a turning on billion dollar takeover. ao unexpected problems for danish shipping company. they had lost in the second quarter two to a write-down in the tank in unit and they say a cyber attack will wipe out as from a $300 million third-quarter profit. asiaof the biggest bets on with investments in the second quarter. $345 million from emerging markets etf that is dominated by chinese companies. david: thank you. to passngress failed new health-care legislation, the question came to be how the trump administration will administer obamacare, with

saying they may end cost payment to insurers. the deficit would go up by $194 billion in the next 10 years and premiums would go up 20% by 2018 and wrote to a total of 25% increase by 2020. joining us is the former director of the cbo dan crippen. explain why the deficit goes up if the federal government decides to spend less subsidizing insurance? dan: under current law, both subsidies we are talking about, there are cost sharing reductions, but also, tax credits will replace for some income classes the amount of the increase and for other income classes, more than cover. as cbo concluded in a short sentence, we will be covering more people at a slightly average cost or average subsidy

slightly more than now. so the big round numbers are we would save about $10 billion a year by not paying the cost of sharing reductions spending about $30 billion a year in tax credits increasing and other budgets, so it is pretty more out in the health care sector and covering more people than currently covered. david: did somebody have to ask the cbo to do this and you asked? dan: can this case, they were asked by the democratic leadership in the house and senate. usually, the cbo will score bills -- they are required to score everything, but they will do with the budget committees and appropriators take first priority according to the law. david: with respect to this policy issue pending, because

they have not decided whether to stop the subsidies or not, is it likely this could affect the trump administration's decision that they do not want to run up a bigger deficit so they will not do it? dan: i think it could. by not spending this money, how do we raise the deficit? the answer will be we will be getting more tax credits and currently. i do not think many folks in washington understood we would more than make up for premium increases, so i think there will will think all sides more about consequences a policy of not paying. david: the cbo reigns supreme in washington, d.c. not the first time we have seen this, tried to consider legislation down there. thank you for being with us. todayippen joining us from washington. if you have a bloomberg terminal, watches online and

interact. go to tv on your bloomberg terminal and take a look at that dan crippen interview. live from new york and washington, this is bloomberg. ♪

jonathan: in the markets this morning, here is the story, we had a couple of days of gains and tuesday we were dead flat on the s&p 500. this morning, up. a decent town in europe. when i woke up and came here, pretty much every industry group was in positive territory. a mixed market and fx. if you look at that space, the commodity currencies have outperformed much of the day. the canadian dollar, and then

euro-sterling mixed. euro-dollar pulling back. mayg debate as to what we or may not get them president draghi. that is the story in the fx market. in the bond market, yesterday was about retail sales strong and treasury yields climbed. to switch over to brexit, the u.k. wants to avoid any customs checks with ireland as part of the deal with the eu. the eu has said it is a positive step. joining us is bloomberg's and -- is an morass thomas. emma: the u.k. has said that what it once it to look like and they do not want it to look like a border at all. they do not want a physical

infrastructure that would look like a board of four historical reasons. becausentroversial during the times of trouble in northern ireland, there were military checkpoints on that border. anything that looks like that were brings back those memories will be controversial. also, in terms of the practicalities of day today, huge amount of trade goes across that border, animals roam freely. you might not notice you had driven across the border at the moment, so it is crucial for the irish economy that there isn't a hard border there. ireland has welcomed the uk's proposal. i spoke to my colleague in dublin and he said it is the kirst time to has been a chin between the irish government and the eu because ireland a saying they like the u.k. proposal and they are saying it is a test to the eu and how they treat small companies -- countries.

jonathan:, issues before they get to the future of the relationship between the u.k. and the you post 29 -- eu post 2019, one was the rights of eu citizens after the u.k. leaves the european union and the other was the divorce of brexit billions ofens of euros. where are we on the other two issues at the moment? emma it does: seeing that they -- emma: it does seem they made progress. there was common area. they did not talk about the financial settlement and that is because there is not a huge amount of agreement in london, the marching orders should be. another round of talks starts august 28 so we will know more than. emma ross-thomas, we appreciate your joining us.

so many people are frustrated with this. david: at that the reason for brexit was they don't want a lot of people coming into the country? jonathan: i have just as confused. coming up, the cohead of global fixed income will be joining us after a stunning year in 2017 of investment grade issuance and big issues over the week to discuss. michael o'rourke will weigh in a new york city. counting your down to the opening bell, this is. this is bloomberg tv. ♪

got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.

find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. ♪ >> president trump tibbetts back to playing both sides -- pivots

back to playing both sides. amazon joins the credit binge, adding to the one dollar trillion in high-priced funds already issued this year. investors look to the federal reserve minutes for clues on how soft investment figures might next the central bank's move. good morning, good morning. you are watching "bloomberg daybreak." we are 30 minutes away from that opening bell. futures are up 2/10 of 1%. positive side point, euro stocks claiming a 19 for handle on yesterday's retail sales surprise. treasuries are stable, yields on the following from what we saw yesterday following a data point, all of that ahead of fed minutes. that should cross that story with decent moves.

>> this morning it's all about retail. target shares are popping higher by 3%, getting some of that old love, raising the forecast with online strength really behind it. this is a bit of a feather in the cap or the ceo, brian cornell, and his turnaround plan , which seems to be making a bit of a comeback after those tough quarters not long ago. brian cornell says the retail environment is choppy, but with the company performing well it seems as though they are weathering it at least at this time. taking a look at amazon, it's been a choppy morning. the intraday chart with the premarket action, near 6:00 a.m. the shares seven down 1%. president trump did tweet a bit of an attack, saying that the company is causing great damage to taxpaying retailers.

towns being hurt, jobs being lost. seemed to cause a bit of a downdraft, but as you mentioned, the company did issue $16 billion in bonds to pay for that whole foods acquisition, the fourth-largest bond issuance of the year. look at this, urban outfitters soaring on paper, it's best day in more than a year. they beat earnings estimates by 25%, sales estimates by 1%. looks like the anthropology and free people brands did well offsetting weakness in the flagship store. very interesting is the fact that there is a 22% short interest on this stock, 40% this year. jonathan: there was some pain in shorts will, urban outfitters. we will get last months fomc minutes with the dollar and treasury treading water's on this approach to the inflation

numbers. the balance sheet and the potential for another interest rate hike this year. for more on the fed and the implications for the market, goldman sachs asset management, michael o'rourke, great to have you with us on the program. let's begin with you, john. what will the approach me to five straight months of soft inflation? john: maybe a little bit they have lost their path, seeing the dialogue coming out of their minutes, i don't we will see any shockers today. they will clearly move ahead on reducing the balance sheet that as it relates to continuing the upward path of short-term interest rates, it's going to be all about inflation. five months in a row, that's a lot. ok, it was one off. once you get five in a row, if you get an go through it you see that there are things that are not expected to be repeated.

the fed is willing and hoping to look through it. as you know, the labor market is tight. the economy is doing well. we expect inflation to give up again in the next few months, but it is going to take another upside move in inflation for them to come through with what they are saying, which is multiple moves this year. jonathan: to your point, whole bunch of moves next year. the ultimate crutch, you listen to the comments for the new york fed chief, william dudley, it looks like the soft inflation doesn't matter much as far as the next move is concerned. michael: i agree with that statement. it's really interesting and it will make his fed statements pivotal. the june meeting, i thought the statement was fairly hawkish. what changed the market's perception was the inflation data, the humphrey hawkins testimony in july.

at that point when he is close to a neutral policy stance, everyone's expectation is that the move at the end of the year dropped. saying that financial conditions are a reason we need to continue tightening, the market perception shifted, the fed move by the end of the year had dropped from probably 50% post the fomc meeting to about 30, 30 5%, back up to 45% post build dudley.- bill these could shift back to that expectation of a september hike again. aren't they right at financial conditions have loosened, rather than tightened? there are concerns on the financial stability issues with bubbles and asset values. should they be as concerned? i think the reason why they want financial conditions

because the labor market is tight and that should result in inflation going up and eventually if they do nothing, it will actually overshoot. i think he's right, it certainly the case that they have raise interest rates now and the financial conditions are easier. seems like there are two things that they are not a come pushing. going back to the taper tantrum, in a short. of time before they had chance to raise the rates, now it the opposite, they were talking clearly about tightening policy and financial conditions are easy. the dollar, instead of going up, is quite. it's definitely in our view a different situation where they are going from being concerned that financial conditions will tighten too fast to concerned that they won't tighten at all. people talk about

bubbles, it's hard to point some and say there is a bubble, talking a lot about credit markets being wide-open, looking for yield, people are essentially almost enforced to buy yields for assets. yes, you have definitely seen monetary policy in the u.s. and around the world that has pushed up all financial assets and reduced risk premium. not to bubble territories, but it's hard to say that there is currently a problem. i think if you don't do anything, there could be one. jonathan: it's interesting, the focus has been on an inch of conditions and what it can mean is that it's day dependent. we are still grappling with what that data is and what we are, data dependent. i had a guest on earlier that said the data is backward looking and we are in a ridiculous statement for the whole process.

>> that inflation target didn't become official until 2012 they also left, talking about the dual mandate of unemployment and price stability. they did not put a number on the employment target or what the unemployment rate should be. it's remarkable, if you go back ben bernanke and janet yellen, they would talk about the inflation environment that we've had for the past five years in the recovery, between 1% and 2% pce year growth as price stability. it would be perfection if central banker and obama -- central banker novana said we were 2% shy and we had to keep it easy, keep pushing asset prices higher. jonathan: we've got a problem with your microphone but you have a good point, they introduced a bit of a communication problem here. they introduced the number that

gave them a bit of a credibility issue. michael: no question, they want full employment but they keep revising what that means, where they have clearly cap that's 2%. -- that 2%. they want to go above that so that they can cool things down from there. so, yes, i think they are stuck a little bit in that they put this target out there. i think that they want to see accelerate,ue to but it has not to the satisfaction. they do want inflation to go up and they see that in the data. i think of the economy is doing what they want to do. up, they see prices moving and the definition of price stability has changed over time. michael o'rourke and jonathan beinner: we'll both be staying with us. coming up, we have a discussion on exactly what is going on in washington right now. live from new york, this is

bloomberg. ♪

, i'm: this is bloomberg david westin. tom reed is deeply involved in two of the major initiatives of the trump administration, serving on the house ways and commission and on the trade subcommittee that will be overseen changes made to nafta. we are minutes away from the start of this nafta negotiations in washington and we are joined by tom reed from new york. thank you very much for taking the time to be with us, sir. >> thank you for having me on. you thee have to ask question, given the news conference yesterday, how big a potential distraction is this

discussion of hate groups on the president's position? is that a distraction that may interfere with your work on tax reform and nafta? >> i would not call it a distraction. it is an important issue that we are going to have to focus on and spent time having a conversation about across the nation, but that doesn't mean that we do not do the business of the people. the business now is getting our policies right for the american worker. david: i just have to ask you, do you agree with the president's view that there is blame shared equally coming out of charlottesville? representative read: -- rep. reed: we have to call the white nationalist movement that it is, a movement based on hatred and bigotry and i will stand arm in arm with everyone who wants to oppose that kind of it -- kind of extreme, nationalist respected that they bring to the table. from my perspective, we see extremism on all sides of the

asian, and of that's what the president is talking about, i believe it's right to we call it out for what it is. it's un-american, based on hate and bigotry and it cannot be something we stand for as in american society. let's turn to nafta. you are on the subcommittee for trade. in what the are you united states is trying to accomplish in this negotiation? rep. reed: one of the great reforms we recently did was the negotiation changing how they will be done going forward. the house oflf, representatives and the senate will be intimately involved in these negotiations. i am eager to be a part of this process, to get nafta modernized for the 20th century. it started the negotiation, we didn't even have widely used cell phones. right that we update the agreements and modernize

them for the american worker. everyone we have spoken to seems to agree with that. but how will you personally judge success in these negotiations? themuch will they tie it to trade deficit in mexico? john: how i view this, where does it put the american worker? on an even playing field? then i can be some order of the negotiated policies. that is where we will end up. we have great partners in canada, mexico, and i'm looking to use nafta as a platform to negotiate gold standard language as we go into other negotiations through great written, japan, or the european union. those types of negotiations i think and be influenced in a positive way with what we are doing here, modernizing nafta going forward. david: how often does this come up in your district in new york?

what your constituents talked you about, if anything? there's a lot of misinformation on nafta and other agreements out there. this has become a book you man, if you would, and easy political talking point. most understand that we live in a smaller world today. 95% of the consumers live outside america's borders. they understand that we have to make it here to sell it there and they don't feel that these agreements are fair. that is the perspective that the president tapped into and i support the administration, when it came to negotiating these agreements to make sure we are on an even, level playing field. if you give us that level playing field i am confident that we will win each and every day going forward. you talk to your constituents, are some of them concerned that we could lose jobs of we constrain trade with mexico? rep. reed: i do believe that they understand that we are part of the world economy and that what we are looking for is

an opportunity to compete. they understand that we can't just put up walls and become protectionist. we are just looking for a fair shake and that's the voice am trying to bring to washington, d.c. david: a fair shake sounds reasonable to all of us, i think . thank you very much for joining us today. coming up later today, carlos gutierrez, i'm going to get a chance to talk to him at 1:00 sometime today. this is bloomberg. ♪

jonathan: another day, another debt issue in 2017. at&t selling the biggest debt deal of the year so far, $26.2 billion for its takeover of time warner. the attention, the focus on the

days goes tof amazon. they have issued $16 billion in debt to pay for its acquisition of whole foods. that's for the yield of 1.4 percentage points. joining us now, michael o'rourke and jonathan beinner:. john, let's begin with you. it's amazing, but this is not the first time we have seen that kind of thing before. what do you make of the pricing that goes with the amount of issuance we have had this year? jon: it's concerning because usually when you have so much supply going into the market, you are not getting that. isis basically because there an enormous amount of demand for yield assets, but there is particularly strong demand for long dated assets. think about it from an asset liability standpoint. pension plans with long dated liabilities matching up.

it works from that perspective but you have to think about lending money to a company for 30 years, 40 years. what are they going to look like and are they going to pay me back? jonathan: the u.s. government will be around, i'm not so sure about what amazon will look like. in terms of amazon debt right now, 60 years, you look at the average duration of the index, it's longer than it was over the last couple of years as well. what do you make of that? comparing pricing to where we were, do they need to factor that in as well? michael: they do, especially in the investment grade market with an upward sloping curve. the more it is spread over the comparable that you usually get. that is the case today. because there has been this long dated issue with companies taking full advantage, they are issuing long bonds at very tight spreads.

the corporate market overall has extended quite a bit. when people think about spreads, looking at the investment grade, it looks average. when you actually adjust for the fact that the market stays longer in maturity and duration, it looks like we are in the lowest quartile of spreads. it's been a fascinating year so far for issuance. what's remarkable over the last is the amount of houses that have come out, investment we areent firms saying getting cautious. we are a bit concerned about what's happening in credit. at yet it has been fed after -- issue after issue. >> global central banks around the world have purchased $15 trillion in assets. investors have to buy something. it has to go somewhere. my biggest concern, the thing that frustrates me the most in get 2% gdp growth

per year consistently now. it's been fairly consistent since 2010. but with all this corporate .ssuance, most of it has gone it's not real investment in the economy. that's the concern. talking about yes, companies are making the decision as far as floating debt and low interest businessich is a decision. but it's not going into investment in the country or the economy and that's a problem. david: tying this back to our ,ast discussion, tulips netherlands, things like that, but as inflation generally comes through a different place, those are asset values. what is the danger as they try to go to normalization of that inflation? i believe they have created asset inflation. i have been talking about it for several years now.

over the past two decades, what we did was we traded gdp growth for lower inflation and higher corporate profits. pre-2000, with the wto in 2001, it's been a structural change in the economy. liquidity, thera combination that we kept out there for almost a decade now has gone to asset prices. jonathan: the other thing we should talk about is how michael's -- how market structures constitute all of this as well. when you have an order book as ,arge as the ones we have seen you know what's going to happen. a lot of people are going to grab it anyway because it will have a big role to play in the index. is the index in the story something we need to think about as well?

jon: i think it's definitely feeding the fire. i think, personally, i don't have a problem with the index. people saying that if they are borrowing more money, that's true, but the issue is are you getting compensated for the risk? the path of the investor, the the price on, discovery is a challenge. it creates this circular demand. our concern is not so much that we're lending to companies in a stupid way, just that we have done so much of it. when sentiment shifts, things can get ugly. we spoke with your colleague about a month ago and

.e talk about de-risking talk to me about what that means in the moment. of the economy is good, corporate profits are doing well, so it's not that issue. our concern is about valuations and risk sentiment with complacency. with spreads continuing to grind tighter, we are not in the greatest from a seasonal perspective. we have been selling into that strength. jonathan: jonathan beinner:, sticking with us --jonathan beinner, sticking with us. you are watching "bloomberg daybreak: europe -- daybreak." ♪

♪ jonathan: this is "bloomberg daybreak," to our viewers worldwide, futures positive, positive signs on the s&p 500. across europe as well, treading

border -- water. about four hours, the bond market. the dollar index ahead of that is firmer, up by one quarter of 1%. that is on the back of euro weakness. [opening bell] jonathan: maybe they won't get the news about the papering from mario draghi next week. -- the back of that strongly strong retail sales, u.s. seven on the 10 year, crossing assets into the open. let's get to the cash open with abigail doolittle. abigail: the dow, the s&p 500, the nasdaq, off higher. the s&p 500 and nasdaq closed lower yesterday. the gains,holds onto it will be the fourth update in a row. he says that after last thursday possible decline, monday was the

big game and it is about even. hard to tell whether the bears or the bulls are in control. let's take a look at the big movers in health care this morning. looking at the shares of vista myers squibb after a phase three combined drug combo for kidney cancer was disappointing. alexis, their job -- their drug was approved. theysts there saying that were the best held in the beleaguered block for the drug makers. that the company has a very solid pipeline and balance sheet area let's take a look at how health care fits into the trump trade. in orange we have the s&p 500 up about 15%, right there with the

s&p 500. health care on top, the banks are being held by those rising yields out of the election. rising nonetheless, energy being -- falling.ollowing gina martin adams, bloomberg intelligence equities strategist saying that that could have just as much to do with the possibility of president trump perhaps at some point putting through his policy moves. doolittle, theil earnings so far this year, michael, in the united states, compared to what we were expecting and the enthusiasm for europe, that's what we've heard appear for the last couple of orders. -- quarters. michael: we are looking at earnings that leak a few years ago. we are on pace to have a record

earnings year this year. the problem is to get back to a normal multiple, it would take years to grow into it at an historic pace. earnings have an great, but the market is obviously still lofty. jonathan: one thing i don't understand is that it is easy to divide europe but the united states is grinding out record highs. michael: the level of u.s. outperformance over the past five years, global equities and u.s. equities. that is a relationship that has bottomed. years, talking about most of these currencies around the world, the dollar had a big rally from 2014 through the end of last year. the currencies and the stock

markets are to perform. if you flip that trade around now -- jonathan: i wonder how europe is going to involve. i saw the spanish 10 year at a record low yield, despite the fact that the ecb is on a slow-moving grind to removing accommodation. jon: europe was a surprise to the upside recently. we will do ok, but there is too much optimism now as it relates to europe. there is risk there, focusing particularly on italy. with the ecb likely to taper their purchases relatively soon, we think that that's a good sale at these levels. generally overall we feel europe is ok. still political risk. we think there you have, as opposed to the u.s., where the labor market is tight, basically the out put cap is gone, but

they have one in big chunks of europe. so we don't see the inflation picking up anytime soon. they will have easy monetary policy for a while. david: how concerned are you that the need what michael told us, four years of earnings growth? well, i'm a bond guy, i think you should sell all the equity. [laughter] i think part of the reason why multiples are so high is that on yields are so low. look, i think that if the economy is ok, we are seeing signs that we are towards the later end of the cycle and that the fed is going to want to not slam the brakes but they will want to put the brakes on. earnings will be ok but not that great. yeah, it's hard to see equities getting strong returns going forward. to what extent are the traditional multiples out of date?

michael: it depends on where you see monetary policy going. if we are heading back to a normal policy with normalized or typical valuations, if the historic multiple going back to 1870 is 16 times earnings, right, maybe we won't go back to 16 times now, but we should be headed back in that direction, which is the way we have been heading. a fewan: i asked someone vizio how we will look at this market in 10 years and would we be focused on negative yielding assets? would we borrow at zero interest rates? he put it another way saying -- i wonder if i would wish i bought the 10 year when it was 2.5% because it's lower right now. is that possibly the world we are going into? -- hope i certainly hot

not. is it possible? sure, it is. debate. is inflation dead in the world? our view is no. we have gone through a transition after the crisis. a bit moreting protectionism and i think there is going to be more upward pressure on inflation. we could be wrong about that. interest rates, what is normal? what is normal used to be on fed funds. 4% no one things we're doing that at this point. expect that the business cycle isn't over, that inflation, the phillips curve does exist. the economy if it runs too hot for too long, that we are going to get upside inflation. david: as you look at history and try to project out, globalization is different. the others technology, digital. how do you factor that in? might

that change where we are going? i think the structural shift started around 2000, right? where we went from that 3% growth economy to 2%. that's where the new normal is and has been for almost two decades. i think the key shift here is that market expectations match that. that's a key issue and one thing you want to note with the wage oneation going forward is signaled to me that will be key or pivotal for the next six months is what was recently 4%eased, the jobs opening at . 4% of the labor force. unemployment ranks four point 3%. there is only a 30 basis point spread between the job opening and the unemployed, one of the tightest levels going back to the starting numbers in 2000.

hopefully we start seeing that emerge over the last six months. david: we shall see. thank you very much, jonathan beinner: and michael o'rourke. as we go out now, we take a look at the conference room in the ward park hotel, where they will start nafta negotiations. we are waiting for the news at the top inlet i robert bly heiser -- being led by robert heiser. jonathan: this is what the u.s. equity market looks like area futures are positive. dow, the s&p 500 with 18 out of 19 industry ftse incaptured by the three quarters of 1%. york, you are watching bloomberg tv. ♪

emma: this is "bloomberg daybreak." coming up at 1 p.m., carlos gutierrez will talk about nafta. ♪ we want to turn now to retail, target boosting his forecast for the rest of the year after second order sales topped analyst estimates, improving online sales and customer traffic. you can see the results right there in the marketplace, up 1.2%. zachng us now is sara hall . ivan currently has

a buy on target. aan: it's very good to see retailer doing well in an environment that has been left for dead. they are doing well by competing on what their strengths are. they offer a good value proposition and are doing well at digital fulfillment and they have their own exclusive brands that are doing well. those are the key things, offering good value and good value propositions and customer experiences, involved in becoming an on the channel -- and on the channel -- omni channel retailer. david: a couple of years ago they announced that they would overhaul things. a lot of it was improving the bricks and mortar stores area how much of it is that and how much of it is the growth of online business? ivan: yes, the online business

was up 32% on top of this year, 16% last year. it is growing and accelerating. forward toing walmart earnings coming out. where are you on walmart? neutral, because of the overall size, but they have improved their value proposition and have gone very big into fulfillment.line david: most of the retail discussions we have always come back to amazon. are they competing successfully? ivan: somewhat well on the digital for side, but more importantly people like to go into physical stores and see things, get the immediate gratification there. the other thing that is becoming a major trend in retail is to have a, like, treasure hunt

experience to find new things when you go to the store. that has been a big success for the t.j. maxx and marshalls, for costco, target, and even walmart. you have got to have new and different things so that every time a customer comes into the store they don't know what to expect or find and are looking at something different. that has been a big appeal to the brick and mortar retailers. these sound like tales of two very different components of retail. kohl's,had jcpenney and they were really hit in the earnings when they came out. what is the difference here? >> i think the department store sector is really challenge right now. millennial customers are not very interested in that as a format and walmart and target have done a better job boosting online and appealing to younger

shoppers. david: none of this is a secret. anddon't they find bottom say that if this is where we are going, it's getting this bad, investors will stay with us. taking one shot after another shot after another shot. i think that's right. macy's has swung the biggest, cutting about 20% of their store fleet, acknowledging this reality that you are pointing out, e-commerce is your medically reshaping the business. kohl's, jcpenney, they have not been as aggressive and i think that makes a real difference. that strategy may prove shortsighted down the road. jonathan: sarah, thank you. i think that covers every single stock on the s&p 500. [laughter] jonathan: joining us around the

table, jonathan beinner and michael overwork. o'rourke. yesterday, dick's sporting goods, not a big company, about $3 billion, so certainly not a penny stock. moving 23%. urban outfitters again, not a big company but certainly not a penny stock, a move to the upside. that tells me that you have got that areand a c suite not communicating well at all. coach was down big yesterday, advance auto down yesterday. i think about 85 retailers were down yesterday versus five being up. just an interesting environment. you have got these structural shift going on.

talking about strong retail sales data, one thing i pointed out to my customers last night, you have department stores, walmarts, targets, and , combined ittail has averaged 22% of retail sales, right? you have seen his massive shift over the past years where non-store will be taking over the general merchandise and that is what we are talking about here. onse guys have to become channel retailers and change their models. -- omni channel retailers and change their models. jonathan: this is a slow, painful change. hammered,rting goods, no one seems to know where the the companyichael: said, we are going to be a very promotional and compete for our market share. nike selling on amazon now. these companies have to adapt

quickly. jonathan: in the debt market, you want to get paid. is there still enough from these guys to say you are confident in getting paid? jon: no. [laughter] to know what the ceo is doing? i'm sure the ceo of the last covered wagon company was really smart, too. but they are gone, too. retail hasrspective, been an underperformer for the same reason. there is not enough distress yet. there will always be opportunities in the visual credit, but it's not the time. you joked about it, but maybe cuts won't the enough and this isn't something that can be rescued. it's a structural decline that will versus help anytime soon. is that the way you see it? again, retailn:

sales are great. the consumers buying stuff, just doing it differently. if you have completely the wrong business model, from a creditor, that's the perspective and not someone you will want to lend to. , i think you have to be pretty cautious about the sector. thinking about the melting ice xbe, we can lend to them for because they will be able to years, but often we don't get paid from cash flow, we get paid from a new deal. you need someone to come refinance. you go back to the yellow pages. people who assumed that would be slow, that the ice cube melted pretty darn fast. doesn'talf the audience remember what the yellow pages work, but i do. [laughter] thanks so much to jonathan beinner and michael overwork. .- michael o'rourke

you can go back and look at this discussion with retail, if you want. this is bloomberg. ♪

>> the mexican secretary of the economy, we have already heard from the special trade representative and he is looking forward to productive talks over the next months. notice not years, months. the canadian minister of foreign affairs said that if they don't regard trade surpluses as a success, they don't see an issue with the surpluses around success or failure. we will bring this back to you when there is news coming out of washington or nafta. joining us now, the senior

executive editor for economics and government. how closely will we be covering this? >> we have reporters from mexico, canada, and the u.s., all their. we will be looking for readouts on what took place. we will be covering it extraordinarily closely. last i checked, marty, it's august. this seems like a particularly intense august we have had so far. what are the major stories that we should be focused on for the rest of the day in the week? marty: it will be the gop reaction to donald trump. one thing is pretty striking, none of the said it leadership has made any comment whatsoever on donald trump. mcconnell, the majority whip, nobody. we are looking to see if they will step up the next time we talk about this. howreal story is just

isolated this president becomes and how does that affect his to me his the number one story we need to look out for. while we have been on the -- david: while we have been on the air, hope hicks, 28 years old, the longest-serving political advisor to president trump, going way back in the campaign. what do we know about her, is this a surprise? marty: only a surprise to the extent of her lack of experience in this role, although i don't think that 28 is necessarily a big deal. it depends on who the person is. frankly i think they had a lot of difficulty figuring out who would take that job. she is an extraordinarily loyal person who is in trump's world. she has not been a public presence, so she's relatively clean from a pr standpoint. seems like the best of the very

few choices they had. and probably disinclined to give any calls to "new yorker" reporters. marty: i would suspect she would not do that. [laughter] jonathan: she might be young, but i think she's got some experience in er enough to do that. david: a fair amount. by the way, her father was ogilvie. it's in her blood. jonathan: there you go. ,6 minutes into the session this is what we learned across the board, futures are positive, stocks are up one third on the dow, the s&p 500 up by a order. -- quarter. ♪ ♪

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i'm vonnie quinn. market." "bloomberg ♪ vonnie: here are the top stories we are covering from around the bloomberg and around the world, raising the stakes and upper -- doubling down on the comments in charlottesville. >> there is blame on both sides. doubt about it, you don't have any doubt about it either. vonnie: will republicans continue to abandon the president? then, talks to renegotiate nafta, the north american free trade agreement, getting underway in washington. just saying that nafta needs updating on energy. he said that they have failed countless americans.